Nancy estimates she needs about $40,000 a year after taxes to maintain her lifestyle, but she admits she's not certain what she will do once retired. She might travel a lot; she may need a new car; and she's even considering moving to another province to be closer to her grandchildren.

"I have a chartered accountant who looked at my finances and said, 'It looks like you're going to have to work really hard for the next three years, so put everything away you can and reduce your spending.' "

It's disheartening news, but she says she is willing to do what it takes.

"How long do I have to work; what do I have to put away every year for as long as I am working, and am I living beyond my means?"

Certified financial planner Jan Fraser says Nancy's challenges are less about the numbers and have more to do with the softer issues of retirement planning, which will ultimately determine when she can stop working for good.

"The first question to answer is 'what does her ideal retirement look like?'" says the adviser with Fraser and Partners in Winnipeg.

"The chances are activities that have made her life fulfilling in the past will make her life worth living in retirement."

Figuring out how she wants to spend the next 10 to 30 years may take a little bit of time, especially after a year of emotional and financial upheaval, but examining her spending habits carefully is a good place to start.

"In order to be able to build a meaningful retirement plan, Nancy needs to know what her current lifestyle actually costs," Fraser says, adding a review of monthly bank account and credit card statements will provide a more accurate handle on spending than current estimates.

"I do suspect that she has underestimated what she will require in the first 10 years of her retirement."

For instance, Nancy's stated monthly housing cost may be too low.

Property taxes, maintenance, utilities and major upgrades to maintain her home's value will likely add up to more than $625 a month.

Nancy may also find some expenses will decrease once she retires -- such as gasoline and office supplies -- while others, such as vacations and gifts, may rise.

Because Nancy is self-employed, many of her expenses are a mixture of business and pleasure. She has been able to claim a number of expenses -- utilities, vehicles costs, etc. -- as employment tax deductions, something she will no longer be able to do once fully retired.

Reviewing tax returns for the past couple of years will help her determine whether or not losing those deductions will increase her overall cost of living.

Yet even without firmer numbers, Nancy can retire tomorrow if she so chooses. The question is whether she can balance spending early in retirement with potentially increased costs later on if she requires assisted-living accommodations or home care.

On the whole, however, retirees tend to spend the most money in the first decade after retiring, Fraser says.

At the very least, Nancy should be able to build a layered retirement income that will exceed her after-tax goal of $40,000 annually.

Fraser says her estimate is conservative, based on a four per cent portfolio return and three per cent inflation.

If Nancy finds she wants to spend a little more in the next decade, the downside will be that she will likely leave behind a smaller estate if she lives into her 90s.

Still, she does have some wiggle room. By her mid-80s, Nancy's income-producing assets would be a little less than $500,000 in today's dollars. At that point if she sells her home, her wealth would exceed $900,000, also in today's dollars.

Afterward, her net worth would slowly decline as she uses the proceeds from the sale of her home to fund additional costs that may be required for home care or assisted living.

Even then, Nancy will still have some financial flexibility. By her mid-90s, her net worth will still be about $400,000 in today's dollars.

It's unlikely, however, she will choose to live in her home until age 85, especially if she is contemplating moving closer to family.

"At that time, Nancy may look forward to the simpler lifestyle that renting may provide."

Furthermore, she needs to work with a planner or adviser who can help her set up her investments to provide the income she requires as tax-efficiently as possible.

And making better use of her TFSA certainly should be a cornerstone of that strategy.

"Right now, she's only got about $5,000 in there, so she should consider moving her non-registered investments into the tax-sheltered account," Fraser says.

Moving this money to the TFSA may result in a tax event. Professional investment advice will be instrumental in helping weigh future tax savings as investments growth inside the TFSA against potential capital-gains taxes she may have to pay when moving the money into the tax-sheltered account.

"In her case, this account could be earmarked as a source of funds for future health-care costs," Fraser says, adding a dividend investment strategy -- not GICs and savings accounts -- is well-suited for the TFSA. "If she can earn four to five per cent each year in her TFSA, she can protect her capital against the loss of purchasing power that comes as a result of inflation."

And the money can be withdrawn without affecting income-tested benefits such as OAS.

Still, the above numbers are just estimates. Once Nancy has a better idea of what she wants to do in retirement, they are likely to change. Regardless, she is well-positioned to adjust, Fraser says.

"If she works this year and possibly next, really focusing on figuring this out while putting as much money away as possibly, she'll do all right."

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